In all fairness, moat based on anything possesses a certain amount of risk.

But a moat based on talent? Compared to moats as listed by Morningstar such as Network Effect, Intangible Assets, Cost Advantage, Switching Cost and/or Efficient Scale, a moat based on talent just has too many moving parts that reduces the robustness of the moat.

And why is too many moving parts a bad thing? Any system that relies on more moving parts is more prone to break down than a system that relies on less moving parts simply due to probability. If your reliability target rate is 90%, you only need a 90% reliability rate if your system has 1 moving part, 94.87% reliability rate each for 2 moving parts, 96.55% reliability rate each for 3 moving parts and so on… [1]

And how is a moat based on talent a moat that has many moving parts? You need to continuously recruit, retain, retrain and retire people constantly. And even so, if you diligently do your utmost best to do the 4Rs, it doesn’t guarantee that your talents are able to perform in all kinds of environments. Couple with the fact that the war for talent is not showing any signs of decreasing intensity, a moat based on talent will only continually shrink (my hypothesis) until perfect competition sets in and destroys any sustainable market beating value a company can have.

And that’s how I felt when I was working on a “Understanding T.Rowe Price” (still work in progress) post after doing one for ExxonMobil.